Calling all builders
The U.S. military is looking for a few good builders—make that quite a few builders—to help it provide better housing for thousands of enlisted personnel. Billions of dollars have been committed to privatized construction projects, on and off base, during the next few years. The U.S. Air Force currently has 30,372 housing units under construction. The Army has budgeted $37.5 billion for new housing construction from 2008 to 2013. Additional monies have been allocated by the Navy and the Marines.
Private sector builders are also being asked to erect barracks, administration buildings, dining halls and medical facilities on military bases. Another phase of privatization involves remodeling existing military housing.
“We have a lot of money to put out into the market,” said Ron White, who oversees Army housing installations as an RCI Specialist, speaking to a group of builders and suppliers at the International Builders’ Show (IBS) last month. “There are opportunities for construction companies that want to bid [on these jobs.> I have yet to go to an installation where they didn’t tell me they’re having trouble finding the work force or the suppliers they need. If you hook up with them, and your pricing is right, you’ll have business heading your way.”
In fact, domestic military construction projects have provided sorely needed revenues to LBM suppliers during the down turn.
At the risk of alerting the rest of the industry to a healthy market segment, several dealers, distributors and contractors who work on these projects agreed to be interviewed by Home Channel News—if only to dispel the notion that just anybody can supply a multi-phase, 1,500-unit new housing project.
Meanwhile, the military is trying to throw open the doors of its construction process to encourage competitive bidding. During the 2009 IBS seminar entitled, “Attention! Builder Opportunities in Military Housing,” the Army representative said he was concerned over his rising costs per housing unit.
“It’s gotten rather high,” White told the audience of 120 building professionals. “We want more bidders.”
Getting in the gate
Anyone can find out where the military is planning to build by visiting the Department of Defense’s housing privatization Web site. (See sidebar )Most projects are within 60 miles of the base, so servicemen and women don’t have far to travel to work.
At first, the number of building projects seems staggering; almost two-thirds of the states in the United States have a military installation with housing units under construction or in the pipeline. But look down the list of developers, and some names start to repeat themselves: Hunt Building Corp., Aurora Military Housing, Actus Lend Lease and Forest City. These are the companies that have agreed to a 50-year lease from the federal government.
The companies bear the cost of construction and building materials, and they rent the finished houses to military families. Since enlisted personnel can spend their housing allowance anywhere they choose, developers have an incentive to build attractive homes, keep them in good repair and offer them at market rates.
“It’s the allowances for housing that drives the whole thing,” said Robert Harris of the National Association of Home Builders (NAHB) Research Center. “The money is there.”
Harris directs the research center’s Military Housing division, which provides consulting services to the Department of Defense and helps promote military housing opportunities to the building community. According to Harris, many of the large military housing developers partner with regional or local home-building firms. These builders then turn to their regular contractors and suppliers. “If there are already established relationships, people just give [each other> a call,” he said.
This is how John Reasor, general manager of the North Carolina division of Carpenter Contractors of America, eventually got his foot in the door of an Actus project. Reasor had submitted unsuccessful bids to three general contractors working on military installations in his area. But one of the winning truss manufacturers fell behind, Reasor said. “The military expects these units to go up in a timely fashion, and the other contractor couldn’t keep up,” he said. “We had a contact that is a mutual lumber supplier, and they got us an introduction.”
Carpenter Contractors is now manufacturing roof and floor systems for two bedroom units attached to Camp Lejeune, a Marine Corps base near Jacksonville, N.C. Next up: Phase I of a 4,000-unit housing project at Fort Bragg, an Army installation in Fayetteville, N.C., scheduled to begin in 2009.
“There’s no guarantee the same general contractor will get it, but [either way>, we intend to bid on it,” Reasor said. “It’s a big help to us, to keep that kind of volume flowing through our shop.”
Afew good dealers
Like his counterpart in the Army, Mark Perodeau, a program manager for the Air Force housing privatization program, says there are plenty of opportunities for building material suppliers and contractors on the ground level. “Our projects average 1,500 to 2,500 homes,” Perodeau said. “Nobody can go into these projects without a lot of subcontractors. That’s where the sheetrock [hangers>, the plumbers and other [smaller players> get in.”
Project developers are expected to line up their own financing, but the Air Force will often cover the gap with a government loan, according to Perodeau. (The Army and Navy do things a little differently, sometimes relying on government equity instead of loans to cover the shortfall.) Requests for Proposals (RFPs) are posted through adivision called the Air Force Center for Engineering and the Environment [See sidebar >. The Air Force currently has 30,372 housing units under construction at 36 bases. RFPs will go out for an additional 15,660 units in the next two years.
The Army has projects in solicitation or under development at Fort Huachuca (Yuma, Ariz.); Aberdeen Proving Grounds (Aberdeen, Md.); Fort Richardson (next to Anchorage, Alaska); and Fort Greely (south of Fairbanks, Alaska).
Two of the busiest states, in terms of privatized military housing projects, are Hawaii and Alaska. Honsador Lumber has supplied materials to a number of projects over the past few years and will continue to do so, according to CEO Carl Liliequist. Projects include Fort Shafter and Schofield Barracks, two Army installations near Honolulu.
MILITARY (WEB) SITESIn 1996, the U.S. Congress authorized the military to engage the private sector in building military housing. The idea was to improve the quality of life for service members with better housing. The military also hoped that private home builders could do the job faster and more efficiently.
For the most part, the Military Housing Privatization Initiative (MHPI) has been considered a success. All four branches of the service have embraced the program to build or remodel family housing units. Next up are bachelor quarters, dining halls, training barracks and transitional housing for wounded soldiers.
Overall site for Department of Defense military housing projects. Contains a state by state listing: http://www.acq.osd.mil/housing
U.S. Air Force Center for Engineering and the Environment: www.afcee.af.mil/resources/housingprivatization/index.asp
Contains Requests for Proposals (RFPs), Open Construction Bids, Contractor Job Leads for numerous government projects, including military construction jobs: www.fedbizopps.gov
Spenard Builders Supply, the Alaskan division of ProBuild, has supplied housing materials and installation services to Fort Richardson, a 1,107-unit Army project; and Elmendorf AFB, which finished phase II last year with 1,194 housing units.
Spenard got in on the ground floor at Elmendorf in 2001, when the project first started. The developers wanted wall panels, and although Spenard didn’t have a manufacturing plant, they built one in a hurry with some help from Home Lumber, a former ProBuild division in Denver. Spenard has supplied materials for duplexes, fourplexes and barracks, as well as installing cabinets and appliances.
“It takes a big commitment of resources to do these jobs,” said Ed Waite, president of Spenard. Staging materials in arctic conditions is not for the faint hearted, he observed. “We’re an integral part of the military supply chain because we do it well. As long as we’re [competitive> on price, the general contractor prefers to go with us. We have the experience of getting materials up here.”
Geography aside, military housing projects bring their own set of unique challenges—especially if they’re built on base. Delivery drivers need to have their residency or citizenship papers in order; security checks are sometimes needed. Some installations can facilitate the process by fencing off the construction area with its own gate, but others—particularly those with nuclear-powered ships or visiting dignitaries—may be more restrictive.
“There may be days when you can’t get access,” said Harris of the NAHB military housing division. “Especially if there are military drills going on, or the threat level is raised for some reason.”
But at the same time, the government has cut down on the bureaucracy involved in bidding on military housing projects.
“It’s not the perceived 10 pounds of paperwork,” Harris said.
Mike Peyton, a lumber salesman for LBM distributor Shelter Products, has also noticed a change in military protocol since privatization took hold. Twenty-two years ago, when Peyton worked for a company that did military construction projects, “The government used to give you the plans, and then the guys would have a throat cutting contest to build it for them,” Peyton recalled. “Now you get a list of the [desired> amenities, the appliances, square footage and so on. It’s not necessarily the lowest price that wins, but the best design.”
Peyton now works out of Portland, Ore., where he ships lumber to military installations in 10 states. Some ongoing projects are so big, he said, “They scare people off.”
“The bigger the job, the fewer the people who are willing to take it on,” Peyton said. “They don’t want the exposure. It can take a company down.”
Representatives from the Army, the Air Force and the NAHB urge builders and suppliers to take a different view.
“We don’t want just the big operators,” said White of the U.S. Army. “We tell our developers not to block all the small contractors and craftsman from the action. We watch for that.”
The NAHB’s Harris advises “forbearance,” even if a project is already underway.
“Once the contract is awarded, it’s only the beginning,” Harris said. “[The developers> may have a plan going in, but maybe you have a better plan.”
